Banco de Mocambique (BM) has said projections from its Department of Economic Studies point to an upward revision of the cost of living indicator in 2019, contrary to the initial forecasts predicted in Februaryof about 6 percent., APA can report on Wednesday.Without any new projections, however, this department of the Central Bank only asserts that inflation will remain the same as a single digit at 3.5 percent in 2018), but internal and external shocks will exacerbate the outlook.
In a media statement to APA on Wednesday, BM said the annual inflation rate in Mozambique fell to 3.27 percent in April 2019 from 3.41 percent in the prior month, reaching its lowest level since May 2018.
The worsening of this indicator is due to the increase in the price of oil in the international market, supply shock caused by the recent natural disasters namely cyclones Idai and Kenneth, a continuous trend of depreciation of the exchange rate as a result of the increase of imports of goods to ensure the reconstruction infrastructures in areas affected by natural disasters, as well as the financing of the economy in general.
“The risks associated with the outlook for inflation remain, in general, are negative. At the internal level, the main source of risk is the sustainability of public debt in the context of uncertainties regarding the financing of the 2019 election deficit, coupled with the need for humanitarian assistance, reconstruction of infrastructures and loss of public revenue in the central and northern regions “, stresses the BM.
It emphasizes that, at the external level, there are significant risks of slowing global growth in the face of the continuing trade tension between the main economies such as US and China, with an impact on external trade flows and volatility of international merchandise prices.
With the cost of living worsening the economy as a whole, it pays the “final bill.” The slowdown in economic activity is due to the sharp fall in production in agriculture, trade and transport due to the effect of Idai and Kenneth.
Last week, the government revised down economic growth this year, with new projections pointing to an increase in gross domestic product (GDP) by between 2 and 2.5 percent, against the initial forecast of 4.7 percent.